Breaking Merck patent may drive
investment away from Brazil
Brazil's government will bypass
Merck's patent on HIV drug Sustiva in order to manufacture this best-selling
NNRTI as a lower-priced generic. Although this will increase therapy-access
for many HIV/AIDS patients, it will intensify concerns over parallel imports
into Western markets, according to Datamonitor's HIV analyst Lisette
Oversteegen.
Brazil's president Luiz Inacio Lula da Silva has issued a 'compulsory license'
that bypasses the patent on the HIV drug Sustiva (efavirenz), which is
marketed by Merck & Co. as Stocrin in developing countries. His decision came
a day after the Brazilian government rejected Merck's offer to sell the drug
at a 30% discount, or $1.10 per pill (down from $1.57). The country's
government is seeking lower prices to limit the cost of its program providing
free treatment to all people in Brazil infected with HIV. The government wants
Merck to lower its price to $0.65 per pill, the same price Thailand pays for
Sustiva.
The compulsory license will now allow Brazil to manufacture or buy generic
versions of Sustiva, effectively overturning its patent protection. It is
thought that the country will save $30 million this year by purchasing generic
efavirenz and will cut $237 million from its HIV/AIDS drug bill through 2012,
when the patent right would expire. Merck has historically attempted to help
improve access to its products through price cuts before. This time last year,
it cut prices on Sustiva by 20% in the lowest income countries, and slightly
reduced prices in medium Human Development Index countries.
HIV in developing countries
The human immunodeficiency virus (HIV) is a virus that steadily weakens the
body's immune system, leading to the development of acquired immune deficiency
syndrome (AIDS). Primary modes of transmission include sexual contact,
infected blood-to-blood contact (occurring in intravenous drug users) and
vertical transmission from an HIV-positive mother to her baby. According to
UNAIDS, an estimated 4.3 million new HIV infections occurred worldwide in 2006
and approximately 2.9 million people died of AIDS-related illnesses.
While HIV-infected individuals living in Western and Central Europe and North
America represent only 3-6% (1.1 million to 2.2 million) of the globally
infected population, over 95% of the HIV/AIDS infected population live in the
developing world, highlighting the need for cheap, simple and effective
treatments. Brazil had an estimated HIV population of 620,000 adults and
children in 2005, with 14,000 individuals dying due to AIDS in the same year.
Sustiva is key in first-line treatment
Sustiva belongs to the class of non nucleoside reverse transcriptase
inhibitors (NNRTIs) which is used as first-line treatment for HIV patients.
After the launch of nucleoside reverse transcriptase inhibitors (NRTIs) and
protease inhibitors (PIs), the NNRTIs were the third class of antiretroviral
therapy to be introduced on the HIV market. The launch of the first PI in 1995
led to highly active antiretroviral therapy (HAART) regimes, which combine
several antiretroviral drugs from different drug classes for the treatment of
HIV infected patients.
NNRTIs are now "a key component of HAART regimes and are often preferred by
physicians for use in first-line treatment", Oversteegen explains. "Their
lower pill burden and favorable toxicity profile gives them some advantages
over other drug classes, although resistance can restrict their efficacy."
Sustiva dominates the NNRTI class in terms of sales and saw revenues of $710
million in 2006 in the six major markets (US, France, Germany, Italy, Spain
and the UK). Its once-daily dosing, along with proven efficacy and potency in
combinations with several commonly prescribed NRTIs has led it to be the
preferred choice of drug for first-line therapy.
TRIPS agreement
Brazil was the first country to provide free antiretroviral treatment for its
HIV infected citizens in 1996. Although Brazil started this free program using
branded drugs, it later shifted to generic drugs to ensure the sustainability
of the program, which was mainly threatened by the high costs of patented
drugs. This was a bold step, not least because of the potential for such a
move to incur severe trade restrictions from Developed World economies eager
to preserve patent protection. It also accelerated the demand for price-cuts
in branded antiretrovirals.
Under the Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS), countries belonging to the World Trade Organization (WTO) must grant
exclusive patent rights on medicines, but also retain the right to grant
compulsory licenses that legally authorize the production of lower-cost,
generic versions of patented drugs in exchange for royalties. Breaking the
monopoly of patent-holders is only allowed, within limits, when a country
faces an emergency health issue, such as an HIV epidemic. TRIPS also states
that products made under compulsory licenses must be 'predominantly for the
supply of the domestic market', which limits the quantity of generic medicines
that can be exported between WTO member countries. However, in December 2005,
the WTO amended its intellectual property rules to permit countries that lack
a strong pharmaceutical industry to import generic medications for HIV and
other high-priority communicable diseases.
Not the first time…
In recent years, Brazil has repeatedly managed to get steep price reductions
on drugs from big pharmaceutical companies by threatening to break patents,
although this is the first time that the country has actually broken such a
patent. In July 2005, Abbott agreed to keep the price of Kaletra (lopinavir/ritonavir),
a top-selling protease inhibitor (PI), at current levels for the next six
years in return for Brazil not to break Abbott's patent. However, the
Brazilian Health Minister dismissed the agreement and said the country would
continue to negotiate for a lower price or country manufacturers would break
Kaletra's patent and sell the drug for a highly reduced price.
Finally, an agreement was reached in October 2005 with Abbott lowering the
price in order to protect the drug's patent. The same happened with Gilead's
Viread (tenofovir), a high-selling NRTI and Roche/Pfizer's Viracept (nelfinavir),
a PI that has been facing decreasing sales in the six major markets. Brazil is
in continuous talks with the drug companies that manufacture nine of the 17
antiretrovirals used in the country's free treatment program, while the other
eight are already produced in local laboratories and are not patented. It is
evident that pharmaceutical companies prefer to decrease their prices in order
to retain control over the Brazilian market, rather than to lose it
completely. It is therefore possible that Merck will offer a further price
reduction in order to prevent the loss of Sustiva's patent.
Mixed reactions
For obvious reasons, AIDS activists are supportive of Brazil's forward actions
to ensure increasing drug access for HIV/AIDS patients. The president of the
US-based AIDS Healthcare Foundation called Brazil's achievement a "victory".
However, the US Chamber and US-Brazil Business Council stated that the
decision on breaking the patent of Merck's Sustiva was a "major step backward"
in intellectual property law and warned it could harm development.
The production of low-priced drugs may lead to increased parallel trading, the
process where pharmaceutical products that are available in one country are
exported and resold in another country for a higher price by an intermediary,
fuelled by significant price differences between countries.
"Furthermore, the pharmaceutical industry may put pressure on their own
governments to limit or cancel trade agreements that may affect wider economic
development," Oversteegen comments. Brazil in particular will have to be
careful not to alienate industries that rely on intellectual property from
investing in their country.
Related research:
•
Generics will play an increasingly important role in the pharma industry
•
Commercial Insight: HIV - Change of guard
